Deregulation in an Age of Imperial Ambition

As Washington tears down the regulatory bulwarks erected after 2008, is it sending a message to the world: institutional discipline is negotiable when politics demands. The unraveling of its financial restraint and trade discipline now marks a turning point for a world built on American credibility, with consequences that will be felt far beyond Washington — across markets, capitals, and institutions worldwide.

History of humans shows that Empires rarely collapse through conquest alone. They unravel quietly, through internal decisions dressed up as progress, through the steady substitution of restraint with entitlement, and through the belief that power can outlive discipline.

What we are witnessing in Washington today is a philosophical one. The dismantling of financial safeguards, the casual sidelining of global norms, and the conversion of institutions into instruments of political ambition signal something larger than deregulation. They mark the moment when a hegemon begins to behave less like a custodian of order and more like a state convinced the rules no longer apply to it.

There has always been a comforting fiction in global finance: that some institutions exist above politics. That regulatory independence in advanced economies is deep enough to withstand political pressure. That belief is no longer sustainable.

Over the past year, US regulators have moved to dilute post-crisis prudential standards that were once treated as non-negotiable. It is a systematic retreat from the safeguards painstakingly erected after 2008. The review of the supplementary leverage ratio represents more than a rule change. It signals a change of philosophy. The approval of measures that reduce capital buffers for global banks by an estimated $13 billion only underlines the direction of travel. When capital cushions fall by over a quarter at several institutions, this could be mistaken to be structural reversal.

The justification, as always, is growth. Supporters argue that deregulation unlocks over $2 trillion in additional lending capacity, revitalises Treasury markets, and fuels economic expansion. This language is seductive. It was seductive before 2008 too. What is missing from these claims is any acknowledgment that resilience is not free and that capital buffers exist not to restrain growth, but to prevent collapse. The choice being made is not between dynamism and caution.

This is the critical shift that deserves attention. Regulation in the United States is no longer being shaped primarily by financial logic. It is being executed as political strategy. Deregulation has moved from ideological preference to governing doctrine. In such a climate, the Federal Reserve and enforcement agencies may retain procedural authority, but their strategic independence might reduce in plain sight. Institutional discretion narrows when political outcomes take precedence. What remains is compliance disguised as consensus.

For decades, Western regulators, multilateral institutions, and rating agencies have lectured emerging economies on governance rigor. Capital discipline, regulatory autonomy, central bank credibility, institutional restraint were presented as absolutes, not preferences. India and others were repeatedly assessed against these imperatives. Markets were trained to treat deviations from Western regulatory consensus as risk.

That premise now looks badly compromised.

If the world’s most systemically important economy is willing to dilute its defenses for political convenience, the moral and technical high ground collapses. It cannot be insisted abroad while being dismantled at home. The framework that disciplined others is no longer binding its architects.

This erosion is not confined to finance. It extends into trade, diplomacy, and treaty governance. The US has increasingly disengaged from multilateral discipline when compliance no longer suits political objectives. The weakening of the global trading system through unilateral tariffs and stalled dispute mechanisms is not accidental. It is strategic. The result is a trade order governed by leverage rather than law, by retaliation rather than resolution.

For emerging economies, the implications are sobering. First, they must recognise that institutional credibility cannot be outsourced to Western endorsement. Domestic resilience matters more than international applause. Second, they must acknowledge that lectures delivered from compromised ground carry diminishing weight. When standards fracture at the center, conformity at the periphery no longer looks like prudence. It begins to look like submission.

India’s experience illustrates this asymmetry. For years, Western commentators and rating agencies scrutinised the relationship between Indian regulators and the state with relentless intensity. Independence was framed as sacrosanct. Deviations were treated as indicators of instability. That lens now looks deeply compromised when similar intrusions are unfolding within Western systems themselves.

Multilateral institutions, western regulators, and credit-rating agencies now face an uncomfortable reckoning. The “rules-based order” has revealed itself to be conditional, not constitutional. What once appeared permanent now resembles architecture built on shifting sand.

Let us be clear. This is not an ideological complaint against markets. It is an institutional warning. Weakening capital standards increases fragility whether it occurs in New York or Nairobi. Making trade a geopolitical weapon does not merely distort markets. It corrodes trust. And trust is the real reserve currency of global finance.

What makes this moment historically dangerous is not the policy itself. It is what the policy communicates. Markets operate not only on numbers, but on belief. Belief that rules outlast leaders. Belief that institutions resist capture. Belief that memory of crisis is stronger than appetite for risk.

The United States once functioned not only as the world’s largest economy, but as its anchor of confidence. That role rested not on size alone, but on institutional predictability. Administrations changed. The system did not. That continuity is now in retreat. Regulation is no longer anchored primarily in financial logic. The grammar of American finance is being redrafted by political hands.

The real cost of today’s policies will not surface in quarterly earnings. It will surface in the next stress point, the next liquidity shock, the next global rupture. That is when the world will discover whether safeguards were traded for speed and whether political comfort became structural vulnerability.

If institutions are not defended everywhere, they will hold nowhere. And when they fail, what collapses will not merely be balance sheets, treaties, or capital rules. It will be the global presumption that rules are stronger than power.